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Federal Trade Commission v. Skybiz.com, Inc.

United States District Court for the Northern District of Oklahoma
No. 01-CV-396 (2001)


Facts

Skybiz.com, Inc. (Skybiz) (defendant) operated a multi-level marketing (MLM) scheme that involved the sale of Web Pak, a computer-related package that contained tools and teaching videos for creating an internet website. Skybiz sold Web Pak to consumers known as Associates. Associates then earned commission from Skybiz by recruiting and selling Web Pak to new Associates, who in turn earned commission by recruiting and selling the product to other Associates. Through this process, Associates were able to earn commission not only from their own sales, but also from the sales of their recruited Associates and any Associates recruited by those Associates. The Federal Trade Commission (FTC) (plaintiff) sued Skybiz for violating section 5 of the Federal Trade Commission Act (FTCA), 15 U.S.C. § 45. Specifically, the FTC alleged that Skybiz had made false and misleading statements, provided others with the means to make deceptive claims, failed to disclose to consumer-Associates that they likely would not achieve the benefits promised, and operated a pyramid scheme in violation of the FTCA. After issuing an order to show cause why a preliminary injunction against Skybiz should not be granted, the district court rendered findings of fact and conclusions of law.

Rule of Law

Issue

Holding and Reasoning (Kern, C.J.)

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